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Equilibrium's Finance and Investment News Roundup

In the week following the EU referendum and subsequent Brexit, we attempt to cut through the turmoil and round up the latest market and finance news. We look at the current market conditions, hear anecdotes of international investors starting to pull out of the UK and, in more positive news, find out which investors are benefiting from Brexit.  

The pound, European shares rise for first time since Brexit

For the first time in three days, European shares and the pound rallied on Tuesday. 

The markets slumped in the aftermath of the UK's historic decision to leave the EU, resulting in the pound dropping to its lowest in 30 years and the value of London's banks dropping to levels not seen since the 2008 financial crisis. 

Experts expected the pound to continue to fall over the coming months, but the currency gained yesterday, along with the Stoxx Europe 600 Index. 

In addition, the Bloomberg Commodity Index climbed from a four-week low. 

John Plassard, a senior equity-sales trader in Geneva at Mirabaud Securities, told Bloomberg: "Stocks are rebounding on the expectation that there will be a coordinated intervention by central banks. 

"What central banks can do is put confidence back in the market by telling everyone that they are here and ready to act. If we don’t get that sort of support, we’ll see further declines."

Branson: Chinese investors pulling out of UK 

Virgin tycoon Sir Richard Branson has stated that he has already seen evidence of Chinese business partners pulling investment from the UK in the aftermath of Brexit. 

In an interview with the Guardian, he said that he had met with a group of Chinese businesspeople who have indicated they are going to withdraw the significant investments they have made in England. 

He also suggested "thousands of jobs could be lost" as a result of the vote. 

"Businesspeople do not want politicians to completely and utterly wreck the hard work they’ve done for years and years and that is effectively what happened. Thousands and thousands of jobs will be lost as a result of this. Thousands of jobs that would have been created will be lost and the knock-on effect will be so dire. The sad thing is I really think Brexiters were misled and did not realise."

Investment houses warn of impending 'inequality' 

Investors need to prepare for the risk of 'stagflation' - a mix of higher inflation and slower growth - over the coming years as a result of the growing gulf between rich and poor. 

That's according to global investment houses Bank of America and Pimco, who warned their clients they should expect a more global backlash against the establishment, followed by more protest votes. 

Both firms stated that investors need to anticipate more populist policy responses by governments that will aim to limit this inequality. 

However, Joachim Fels, a global economic adviser at Pimco, said "this would likely come to pass if current or future governments turn more protectionist by erecting barriers to trade and migration, and take up or intensify the battle against inequality by redistributing income (through taxation and regulation) from capital to labour. This could lower potential growth even further and would likely lead to higher wage and inflation pressures". 

Gold, dollar earners benefit from Brexit

While most of the news in the past week has focused on the negative impact of Brexit, there are some winners following the EU referendum. 

According to Rob Davies at the Guardian, they include: 

  • Gold - as bullion is seen as a safe-haven asset, the price of gold has risen by almost 6% in the past week in dollar terms.
  • Dollar earners - companies that earn more money in dollars than pounds are set to gain.
  • Exporters and luxury brands - smaller UK firms that rely on exports are set to benefit in the short term, while cheaper luxury products are more appealing to international buyers in the current climate. 
  • Overseas investment funds - those investing in foreign assets, such as Asian and Chinese investment trusts, have performed well this week. 
  • UK tourist hotspots - the cheaper pound means that tourist hotspots in the UK have immediately become more desirable for tourists who usually find it too expensive. However, Mr Davies warned that a weaker British economy could have a negative impact on domestic tourism.